TAX LEVY A. TAX AT A GLANCE B. TAX LEVY SOURCES VIII-1

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1 A. TAX AT A GLANCE TAX LEVY The maximum allowable levy for 2018 is $101.6 million. For 2018 the levy will be $72.0 million. The estimated millage rate is $ The 2018 levy will be used for: o General Obligation (G.O.) Bonds Debt Service o Regional Transportation projects o Environmental Remediation o Capital projects meeting specified criteria endorsed by the Commission o Economic development initiatives including workforce development and economic development partnership programs o Other environmental initiatives including Airport Community Ecology funding and energy and sustainability policy directives o City of SeaTac security enhancements o Local community advertising B. TAX LEVY SOURCES TYPES AND LIMITS OF LEVIES: Regular The County Treasurer acts as an agent to collect property taxes levied in the County for all taxing authorities. Taxes are levied annually on January 1 on property value listed as of the prior year. Assessed values are established by the County Assessor at 100% of fair market value. A re-evaluation of all properties is required annually. Taxes are due in two equal installments on April 30 and October 31. Collections are distributed to the Port by the County Treasurer. The Port is permitted to levy up to $0.45 per $1,000 of Assessed Valuation for general Port purposes under Washington State law in Revised Code of Washington ( RCW ) Chapter The levy may go beyond the $0.45 limit to provide for G.O. Bonds debt service. However, the rate may be reduced below the $0.45 limit for the following reason: RCW Chapter limits the annual growth of regular property taxes to the lesser of 1% or the inflation rate, where inflation is measured by the percentage change in the implicit price deflator for personal consumption expenditures for the United States, after adjustments for new construction. This 1% limit factor was instituted by Initiative 747 that Washington State voters approved in November Prior to the passage of the Initiative, the growth limit was the lesser of 6% or the inflation rate (for levy limit calculation see Section XI Statutory Budget). VIII-1

2 FIGURE VIII-1 shows the maximum levy permitted by law versus the actual levy levied by the Port from 1991 (the last year the Port levied the maximum) to In 1989, the law was changed whereby a port could have a levy at less than the maximum while preserving the ability to tax up to the maximum in the future if the need was justified. This allows a port to tax at the lower level in the years when the maximum levy is not required, but return to the maximum level in years of need. Since 1991, on a cumulative basis, the Port has levied a total of $491 million less than it could have if it had levied the maximum allowable levy each year. FIGURE VIII-1: ACTUAL TAX LEVY VS. MAXIMUM ALLOWABLE LEVY: FIGURE VIII-2 shows the historical millage rate from 2009 to The Port kept the tax levy at $73.0 million from 2012 to 2015 and lowered it to $72.0 million for 2016 to FIGURE VIII-2: TAX LEVY VS. MILLAGE RATE VIII-2

3 Special Tax Levies Special levies approved by the voters are not subject to the same limitations as the regular levy. The Port can levy property taxes for dredging, canal construction, leveling or filling upon approval of the majority of voters within the Port District, not to exceed $0.45 per $1,000 of Assessed Value of taxable property within the Port District. Industrial Development District Tax Levies The Port may also levy property taxes for Industrial Development Districts (under a comprehensive scheme of harbor improvements), for two multi-year periods. The Port of Seattle levied the tax for a six-year period between 1963 and 1968 for property acquisition and development of the lower Duwamish River. In 2015, the rules governing the IDD tax levy were modified by the Washington State Legislature. Under the new rules, if the Port intends to levy this tax for a second multi-year period (not to exceed twenty years), the Port must adopt a resolution approving the use of the second levy period and publish notice of intent to impose such a levy no later than April 1 of the year prior to the first collection year. If a petition is filed with signatures of at least eight percent (8%) of the voters, the question of whether or not the levy can be imposed will be decided by voters. The amount of the Industrial Development Levy that could be imposed is now calculated on the Assessed Valuation of taxable property within the Port District in the year prior to the first collection year. This aggregate amount is calculated at $2.72/$1,000 of assessed value and represents the total amount that can be levied over the second levy period. The Port has not levied the second multi-year period, but if the Port were to Levy under this law, Port may levy up to an estimated $1.5 billion over the twenty year period, with the collection period beginning no sooner than C. TAX LEVY USES During the annual budget process, the Commission reviews and approves the use of the tax levy. The levy, by Washington State statute, may be used broadly for general Port purposes. The Port s policy has been to prioritize the use of the levy to first pay debt service on G.O. bonds issued previously to partially fund critical capital infrastructure investments in and around the Seattle Harbor and to fund the Port s contribution to the Alaskan Way Viaduct replacement program. Projects have included container terminal upgrades and expansions, Fishermen's Terminal improvements, and dock renewals and upgrades at the Terminal 86 grain facility and Terminal 115. The levy has also been used to cash fund investments that foster regional economic growth and provide community benefits. These include environmental remediation in the Seattle Harbor, regional freight mobility initiatives such as FAST Corridor, and support for certain workforce development initiatives. More recently, the Port has also used the levy to fund capital projects and initiatives endorsed by the Commission, including, but not limited to, projects supporting maritime industries. The Port has established a Harbor Development Fund and set aside $65 million of existing tax levy dollars in support of NWSA capital projects in the North Harbor, most significantly the modernization of Terminal 5. In 2015, the Port entered into a Memorandum of Understanding (MOU) with the City of Seattle to establish a heavy haul network, which will allow heavier cargo containers to be transported between the Port of Seattle, industrial businesses and rail yards. The MOU provides the framework to repair and build roadways within the network, calls for semi-annual safety inspections of heavy haul trucks, and aligns weight regulations with the state and other municipalities across the country. The heavy haul network will also eliminate citations from the State Patrol to truck drivers for carrying overweight loads. In 2015, the Port agreed to fund between $10.0 million and $20.0 million over a 20 year period for existing and future roadway repairs and reconstruction within the network. VIII-3

4 In 2017, the Port entered into an MOU for $15 million with the City of Seattle to launch the Safe and Swift Corridor Program to support projects and other efforts to improve transportation flow and safety along key freight transportation corridors, including South Spokane Street, East Marginal Way, and 15th Avenue West/Elliott Avenue West/Mercer Street. As the Puget Sound region continues to experience unprecedented growth, the increased population has created mobility and safety challenges within local transportation corridors. The Port previously set aside tax levy funds into the Commission-designated Transportation & Infrastructure Reserve Fund (TIF) to fund its potential $20.0 million contribution to the heavy haul network. Additionally, the Port is contributing approximately $22.4 million of tax levy dollars to the TIF in 2017 to support funding obligations associated with the Safe & Swift Corridor and other known regional transportation commitments. The levy has not traditionally been used for projects at Sea-Tac International Airport, however, the Commission approved the use of the levy for specific projects not eligible for Airport funding such as noise mitigation improvements at certain Highline School District schools near Sea-Tac Airport. The timing of this funding is dependent on the Highline School District, but isn t expected until 2019 at the earliest. Planned uses of levy in 2018 will include debt service on existing G.O. Bonds, environmental remediation expenditures, capital improvements meeting specified criteria endorsed by the Commission, including an acquisition of a recreational marina, projects in support of the fishing industry, improvements at Bell Harbor International Conference Center, along with workforce and economic development initiatives levy uses will also include funding of the Airport Community Ecology Fund, which was created to support projects and programs that improve ecological and environmental attributes in airport-area communities, and funding of ongoing energy and sustainability policy directives. VIII-4

5 TABLE VIII-1: SOURCES AND USES OF TAX LEVY TABLE VIII-1 shows how the Port intends to spend the levy in Notes 2018 ($ in 000's) SOURCES Prior Year Levy Fund Balance $ 69,472 Projected Collection 72,000 Grants & Other Reimbursements 2,635 Total Projected Sources 144,107 USES Total Projected G.O. Debt Service 43,447 Capital Expenditures: NWSA - North Harbor 8,352 Maritime Division 28,013 Economic Development Division 4,910 Total Projected Capital Expenditures 41,275 Other Expenditures: Local Community Advertising 461 Airport Community Ecology Fund 400 Energy and Sustainability Policy Directives 200 City of SeaTac Security Enhancements 1,400 Environmental Remediation Liability (Non-Aviation) 1 5,838 EDD: Workforce Development & Partnership Program 2,593 Total Projected Other Expenditures 10,892 Total Projected Uses 95,614 Projected Ending Balance $ 48,493 Notes: 1) Includes projected cashflows for environmental projects already or expected to be booked as liabilities. VIII-5

6 TABLE VIII-2: EXISTING G.O. BONDS DEBT SERVICE BY PROJECTS AND GROUP TABLE VIII-2 provides the allocation of existing G.O. bond debt service in 2018 to the projects that were funded by G.O. bonds currently outstanding ($ in 000's) Containers East Waterway Dredging $ 732 T-5 Expansion & Upgrades 6,031 T-46 Expansion Redevelopment 4,251 T-18 Expansion & Upgrade 11,067 T-115 Yard Upgrades 178 Total Containers 22,258 Docks and Commercial Properties T-91 Apron & Infrastructure Improvements 2,866 Pier 17 Dock Replacement 106 T-86 Terminal Upgrades 126 Total Docks and Commercial Properties 3,098 Public Expense Alaskan Way Viaduct Replacement 15,919 Economic Development Commercial Properties World Trade Center 541 Fishing Fishermen's Terminal Docks & Seawall Renewal 1,631 Total G.O. Bond Debt Service $ 43,447 VIII-6

7 D. GENERAL OBLIGATION CAPACITY Non-Voted and Voted General Obligation Debt Limitations Under Washington State law the Port may incur indebtedness payable from ad valorem taxes in an amount not exceeding one-fourth of one percent of the value of the taxable property in the District without a vote of the people. With the assent of three-fifths of the voters voting thereon, the District may incur additional G.O. indebtedness provided the total indebtedness of the Port at any time shall not exceed three-fourths of one percent of the value of the taxable property in the District. For the Port, the following estimates the 2018 debt limit: Value of Taxable Property (1) $ 530,058,322,979 Debt Limit, Non-Voted General Obligation Bonds (.25% of Value of Taxable Property) $ 1,325,145,807 Less: Outstanding Non-Voted General Obligation Bonds as of 12/31/2017 $ 388,360,000 Less: Capital leases and other general obligations as of 9/30/ Remaining Capacity of Non-Voted General Obligation Debt $ 936,785,807 Debt Limit, Total General Obligation Debt (.75% of Value of Taxable Property) $ 3,975,437,422 Less: Total Outstanding General Obligation as of 12/31/2017 $ 388,360,000 Less: Capital leases and other general obligations as of 9/30/ Remaining Capacity of Total General Obligation Debt $ 3,587,077,422 (1) Preliminary assessed valuation as of 10/13/2017 LEVY.XLS The Port may levy property taxes sufficient for the payment of principal and interest on voted G.O. indebtedness. The existing limitation provides that unless a higher rate is approved by a majority of the voters at an election, the increase in regular total property taxes payable in the following year shall not exceed the lesser of inflation or one percent of the amount of regular property taxes lawfully levied for such district in the highest of the three most recent years in which such taxes were levied for such district, plus an additional dollar amount calculated by multiplying the increase in assessed value in that district resulting from new construction and improvements to property by the regular property tax levy rate of that district for the preceding year. With a super majority vote, the Port Commission can increase the levy by 1% if inflation is less than 1%. Interaction between General Purpose Levy and General Obligation Debt Capacity Since the 101% levy limitation applies to the total levy for G.O. debt service and for general Port purposes, an increase in the tax levy for G.O. bonds may result in a decrease in the amount which could be levied for general Port purposes, unless a higher aggregate tax levy was approved by the voters. Beginning with the 2001 Budget, the Port established a target to use no more than 75% of the levy for debt service and retain at least 25% for general purposes. VIII-7

8 E. TAXPAYER EFFECT FIGURE VIII-3 shows the assessed valuation as compared to the millage rate from 2009 to The graph shows that the assessed value has increased from $385 billion for the tax year 2009 to an estimated $530 billion for the tax year 2018, while the millage (the rate paid per $1,000 Assessed Value) has decreased from $0.197 in 2009, to the rate of $ applicable in The 2017 preliminary assessed value as of October 13, 2017 is estimated to be $530,058,322 (The 2017 assessed valuation is used for 2018 tax collection). FIGURE VIII-3: KING COUNTY ASSESSED VALUATION VS. PORT MILLAGE RATE F. COUNTY PROPERTY TAX COMPARISON For 2017, the Port accounted for 1.5% of the total property taxes collected by the County. FIGURE VIII-4: 2017 PERCENTAGE OF TAX LEVIES BY TAXING DISTRICT Port 1.5% County 13.4% All Other 13.5% Municipal 17.4% State Schools 19.7% Local Schools 32.1% VIII-8